Thinking out loud

Saturday, December 22, 2007

Fixing Education...

The CFA Institute has lost its case against the AICTE. Another victory for the Govt. of India (and Indian regulation on education). Another loss for education in India. A lot of companies, the likes of Infosys and TCS complain that even though there are thousands upon thousands of engineers in the country, not more than 50% are actually employable as engineers. Something is wrong. Something is very wrong.

We have complained long and loud that there are not enough good educational institutions of higher education in the country. The proposed solution? Regulated fee structures. Compulsory reservations. Compulsory approval from the AICTE. Setting up more "IITs" by the Government of India. Typical central planning solution. Typical case of confusing the disease with the symptoms. The disease, in my opinion, is the too much government intervention in education. The symptom - lack of capable engineers/doctors/lawyers in the country. And this is not specific to India. Even in the US, the primary education is run by the government, and there is universal condemnation of the system. Bill Gates has famously called the American primary education as "obsolete". On the other hand higher education is in the hands of private universities, and they are the magnet for bright students across the world. Even Greenspan, in his book "The Age of Turbulence" observes that the primary school system in the US requires a major overhaul if the US is to maintain its lead in the times to come.

In his book, Greenspan also points out an irony of Government interventionism versus free markets. He points out that cellular telephony in India was considered a luxury and was, therefore, left to the market forces to develop. On the other hand, electricity was considered a necessity and, therefore, the Government decided to develop it on its own. The irony is that today, cellular telephony is available in every corner, every village of the country, while electricity, a necessity, barely reaches a sixth of the villages and is hardly expected to be available 24 hours in most cities in the country.

Having said all this, it is clear that the solution is less, not more regulation. It is to be understood that the reason for the dearth of good education is two-fold. The first is the regulation of fees that can be charged by an educational institute. While the intention of the Government is to limit prices so that everybody can have access to education. However, we must learn from the past experience that price regulation has never led to a more equitable distribution of goods or services. Price regulation leads to a disincentive for anyone to setup an institute. As in the case of goods where black markets immediately spring in to existence, "coaching institutes" have sprung up like mushrooms around the country, bypassing the regulatory framework for "selling" education. Also, price regulation prevents qualified people from taking up jobs as teachers. This completely kills the self-sustaining and self-growing nature of better education and learning.

The reason for regulation is, apparently to make sure to maintain quality and to make sure people are not cheated. Only "good" institutes are supposed to be able to maintain AICTE approval. This system can be replaced by AICTE (or similar body) giving out ratings to the institute and ensuring transparency of processes and quality of the institute. After that, let people choose the institutes they want to study at. Also, stop regulating prices, or atleast allow most institutes to price their services as they want. Initially, the prices will sky-rocket. However, eventually, enough number of institutes will appear and competition will drive prices down. Higher fees will also allow institutes to attract better teachers which itself will have a multiplier effect - driving up quality of students very quickly.

We have taken such a chance before in 1991 with the destruction of the License Raj, with very positive results. We have to try that with education too. That's our only chance.